question archive a)me-too" oncology drug currently in Phase 3 clinical trials that requires a $100 million investment today (year 0), and if successful, provides annual profits of $100 million over its remaining 10 year patent starting in year 3 (otherwise it returns nothing)
a)me-too" oncology drug currently in Phase 3 clinical trials that requires a $100 million investment today (year 0), and if successful, provides annual profits of $100 million over its remaining 10 year patent starting in year 3 (otherwise it returns nothing)
Subject:FinancePrice: Bought3
a)me-too" oncology drug currently in Phase
3 clinical trials that requires a $100 million investment today (year 0), and if successful, provides annual profits of $100 million over its remaining 10 year patent starting in year 3 (otherwise it returns nothing). Suppose the probability of success is 50%.
-Opportunity B: a combination therapy of blinatumomab and chemotherapy designed to cure acute lymphoblastic leukemia that requires a $200 million investment today (year 0), and if successful, provides annual profits of $2 billion over its remaining 10 year patent starting in year 11 (otherwise it returns nothing). Suppose the probability of success is 5%.A) What are the expected annual cash flows of opportunity A for years 3 to 12? (Note: Your answer should be expressed in units of millions of dollars.)
Expected annual cash flow = $___ million
B) What are the expected cash flows of opportunity B for years 11 to 20? (Note: Your answer should be expressed in units of millions of dollars.)
Expected annual cash flow = $____ million
C) Suppose we calculate the NPV of each opportunity by discounting the expected cash flows. Assume a discount rate of 12% per year for opportunity A, and 20% per year for opportunity B. What is the NPV of each opportunity? (Note: Your answer should be expressed in units of millions of dollars.)
NPV opportunity A = $____ million
NPV opportunity B = $____ million
